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How To Gain The Ultimate Competitive Advantage by Not Losing Customers

As you focus on growing your online business, it’s easy to spend all of your time looking for new ways to acquire customers. It seems only natural. The more people at the top of your funnel, the more money you’ll make.

While that is true in the most basic of terms, you should never forget about the less discussed (and arguably more important) goal of keeping customers. If you’re looking for hidden efficiencies, then increasing customer retention and decreasing churn rate is an area you should focus on.

For the uninitiated, churn rate is broadly defined as the number of customers that leave or cancel during a certain period of time. If every one of your customers continues to buy from you forever, you’ll have a 0% churn rate and your business will be an absolute power house. Unfortunately, reality isn’t so kind.

Focusing on customer retention is super important because the effort needed to keep a customer is a fraction of the effort needed to acquire a new one.

Customer retention tactics are specific to individual businesses, but here are three practical steps you can take to help you decrease your churn rate, increase your retention, and put your business ahead of the competition no matter what business you’re in.

1. Know What Loyal Customers Look Like

The first step when addressing customer retention is to have clear metrics. You need numbers you can quickly and easily review to understand which of your retention strategies actually are working.

A people-based analytics tool (like KISSmetrics) gives you the power to calculate your churn rate virtually automatically. This guide on the KISSmetrics revenue report gives you some basic insight into how you can use KISSmetrics’s event tracking to know when SaaS customers cancel and to calculate your churn metrics:

KISSmetrics will calculate a churn number for you automatically, though this is really just the tip of the iceberg. Some things to remember when calculating churn include:

Use short time periods rather than long ones, as you’ll get more actionable numbers. Preferably, you should use the period of your average renewal. If you’re a SaaS business that charges monthly, then use monthly churn as your go-to statistic. Joel York gets into detail on why this is more accurate in his post discussing what churn is all about.

Consider separating different customer groups into specific churn calculations. Looking at retention in cohorts is useful as you can see how customer retention changes over time. This graph from David Skok’s SaaS metrics post is absolute gold:

Look at both revenue and raw customer churn. Focusing only on one and not the other can hide the truth: Are your bigger customers leaving? Is the business still viable since only small customers are churning?

Once you have a solid foundation for calculating your churn rates using an analytics tool (and potentially some spreadsheeting), you need to start setting some goals.

Your acceptable churn rate really depends on your business: Are you selling to enterprise or SMBs? What is the average time to conversion? How much do you charge per month?

These are some of the questions you need to be asking, but the goal is always the same: You want to ensure your customer lifetime value is as high as possible to increase the profit of your business!

Quora is a pretty great source of open discussion on acceptable churn rates, so check it out.

Once you have a number in mind, it’s time to start digging and find out why customers are churning and what you can do about it.

There are all sorts of things you can do to increase your customer retention, many of which will require tight iterating of your website and core product offering to ensure it meets the needs of your customers.

Having said that, there are two things you can do that nearly always will help your customer retention rates.

2. Earn Your Customers’ Trust

We all know how important it is to earn our customers’ trust in order to get them to buy from us in the first place; but, after customers buy from us once, it can be easy to “forget” to focus on maintaining that trust.

I see this regularly with businesses that spend a lot of time focusing on email marketing for activation and less time focusing on email marketing for retention.

One of the best ways to consistently earn your customers’ trust and keep them around is to constantly share your knowledge.

The internet is full of examples of mega-successful companies that have nailed this approach to retention.

For over 12 years, all members of the team at 37signals have contributed to the Signal vs. Noise blog with their thoughts, knowledge, and tips. This constant teaching is something Jason Fried has spoken about before as a great way to market to potential customers:

…and it’s clearly also a great way to keep customers around.

Another great example is SEOmoz’s YouMoz community blog. Letting their customers and community members submit articles and give each other kudos has led to a thriving community that is the go-to site for SEO advice on the web.

By giving their customers a place to share and be recognized, SEOmoz is increasing their customer retention rates massively.

Mr Porter is an example of a modern eCommerce store that understands the “teaching” approach to retention. Not only do Mr Porter shoppers spend big, they return to Mr Porter time and again to learn about what to wear. Check out the Mr Porter homepage:

Most of what you see is not direct product promotion. By educating their male customers, Mr Porter wins loyalty and shoppers that purchase again and again.

How can you go about educating your customers consistently? How can you make them feel part of a “community” and build trust over the long term to win their loyalty?

3. Use Email

Email is powerful because it’s direct. It possibly is one of the most underrated ways to improve your customer retention.

Using behavioral email marketing as part of your product lifecycle is a great way to remind customers of how valuable your product is, stay in touch, and ensure they continue to realize value.

I. Remind them why you’re worth it

Reminding your customers why they do business with you is a logical way to ensure they stay happy. Perfect Audience does a great job of this with their weekly conversion summary emails:

They also send “Yay, you got a conversion” emails when you get a conversion:

Similar to Perfect Audience, Qualaroo nails this form of email marketing with their emails reminding you of your latest answers:

The beauty of these emails is that they consistently remind your customers why they use your product and what they’d miss out on if they were to leave.

II. Remind them to engage

Reminding your customers when they haven’t interacted for a while is a common sense way to encourage them to return. Buffer does a great job of this with their reminders that your “buffer” is empty:

These campaigns are a great way to build a loyal user base that is in the habit of using your product. Using email to nudge customers toward using your product as part of their standard daily routine is an amazing way to increase your retention rates.

Amazon uses product reviews to drive Kindle readers back to Amazon.com to engage and, hopefully, purchase again. Whenever you purchase a book on Amazon.com, this is the sort of campaign you’ll receive:

This is a great example of Amazon bridging the gap between the Kindle, a physical device, and their website. This shows they are always thinking about retention and ways to get you back to Amazon.com to buy again.

OkCupid’s email marketing focuses on encouraging you to return and check out “new matches.” Their campaigns are frequent but targeted enough that they effectively encourage customers to return and re-engage, keeping them around longer in their iPhone app. Their emails are an effective driver of in-app engagement.

III. Share directly in their inbox

Don’t forget about newsletters!

In further reference to the “teaching” done on the Mr Porter site mentioned earlier, Net-a-Porter has started sending their customers a weekly “magazine” that features style tips from around the web. They don’t hard-sell their products in this online magazine, but, instead, share new looks and discuss brands and fashion in general. They educate their customers on what looks good.

Skillshare provides another example with the way they send regular updates featuring their latest courses. Due to the variety available on Skillshare, these really are powerful emails for driving retention (if not sent too often) since they let customers know about categories of courses they may not have seen before. It lets them know about something new, meaning they’ll return to Skillshare’s website.

Stop Churning

So, remember to:

Track your customer churn. Review this number regularly.

Build a community around your business.

Use email to directly encourage customers to continually engage with your product(s).

Or, if you want a bite-sized overview of everything discussed here, check out this slideshow (which, hopefully, will give you a laugh as well):

Let’s face it: You’re never going to get your churn rate to zero. Your customers will leave for all sorts of reasons. That’s part of doing business.

BUT…you can put your best foot forward and work to ensure you retain as many of your customers as possible.

The most important thing is always be sincere and provide value. Don’t ever burn your bridges! It’s not good for your brand and especially not for your churn rate.

Embrace these ideas and feel free to share other retention strategies you use for your business in the comments!

About the Author:Chris Hexton is a co-founder of email remarketing software Vero. He spends his days helping online businesses optimize their email marketing and use it effectively to maximize their profit. You can catch him on Twitter via @chexton and @veroapp. He’d love to talk with you!

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